COURT FILE AND PARTIES
COURT FILE NO.: 05-CV-30446
DATE: 20120813
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Hervé Pomerleau Ontario Inc., Plaintiff (Responding Party on Motion)
AND
City of Ottawa, Defendant (Moving Party on Motion)
BEFORE: Mr. Justice Robert Beaudoin
COUNSEL:
Marc C. Doucet, Counsel for the Plaintiff
Ronald F. Caza, Counsel for the Defendant
HEARD: Written Submissions
COSTS ENDORSEMENT
[ 1 ] On May 16 th , 2012, I dismissed the Defendant’s motion for summary judgment. The Plaintiff, Hervé Pomerleau Ontario Inc. (Pomerleau) now seeks $34,071.34 (plus HST) as costs on a substantial indemnity basis, plus its disbursements, in the amount of $641.34 (including HST).
[ 2 ] The claim for substantial indemnity costs is based on the fact that the City of Ottawa (“City”) took the position, up until the hearing of the motion, that Pomerleau was a “sham” corporation, created for the purpose of defeating the Fairness is a Two-Way Street Act (Construction Labour Mobility) , 1999, S.O. 1999, c. 4. In its Notice of Motion, the City alleged “misrepresentation” but in its Factum filed with the Court, it alleged that the Plaintiff was circumventing the legislation by admittedly using a sham corporation. Pomerleau argues that these unfounded allegations of improper conduct or dishonesty give rise to it claims for costs on a substantial indemnity basis. Pomerleau argues that this argument applies even though allegations of fraud were withdrawn prior to the argument of the hearing.
[ 3 ] The Plaintiff notes that the issues raised were complex, that junior counsel was required and relied upon by both parties. Transcripts from five days of examinations for discovery were referred to in the Notice of Motion and Pomerleau says it had to review all of these. Marc Doucet has twenty-five years experience in construction law. Pomerleau’s claim against the City is for $12,000,000 and it submits that its costs are proportional to the amount claimed.
[ 4 ] The City argues that costs should be awarded on a partial indemnity basis because the motion was not one of those rare and exceptional circumstances that would justify an award of substantial indemnity costs. It notes that neither fraud nor sham, were specifically pleaded. It relies on the fact that misrepresentation was the only allegation in its pleadings.
[ 5 ] The City agrees that the hourly rates charged by Mr. Doucet and Mr. McBride are reasonable at a partial indemnity rate but claims that the time spent on the motion was excessive. The City argues that the motion was not complex and that its own Bill of Costs, on a full indemnity rate, was half of the amount claimed by Pomerleau.
[ 6 ] In my decision, I noted that the City had alleged that the Plaintiff was a “sham” in its Factum:
19 The City submits that it is clear from that statement that what is required is more than a sham or a front: a company is required to be located and do business in Ontario.
26 In its factum, the City argues that the question thus arises as to whether the Pomerleau group should be permitted to circumvent the Act by incorporating what has effectively been admitted to be a sham corporation. In argument, counsel for the City resiled from that position and was careful to emphasize the City is not alleging any fraud on the part of the Defendant. He repeated that the thrust of the City’s argument is that substance must be given priority over form; that the corporate entity of Hervé Pomerleau Ontario Inc. must be ignored and the actual bidder properly identified as Pomerleau Inc., ineligible bidder under the Act .
[ 7 ] In my view, counsel for the City clearly recognized the danger of pleading that Pomerleau was a “sham” corporation, and quickly tried to allege, without establishing the necessary facts, that there was a joint venture involved. In the end, the argument that substance should prevail over form still amounted to an allegation that Pomerleau had dishonestly tried to circumvent the legislation. While the City was initially satisfied with Pomerleau’s compliance with the legislation, it waited six years to try to dismiss Pomerleau’s claim on that basis. While it may not have been legally estopped from raising the argument, it is a relevant factor in assessing the costs of its unsuccessful motion. As justice Leitch said in Joy Estate v. 1156653 Ontario Ltd. , 2007 CarswellOnt 7323 (Sup. Ct.) at para 34 :
34 Apart from fraud, other circumstances which justify an award of substantial indemnity costs can arise where unfounded allegations of improper conduct or illegality seriously prejudicial to the character or reputation of the party have been made (see 131843 Canada Inc. v. Double "R" (Toronto) Ltd ., [1992] O.J. No. 3879 at para. 10 (Gen. Div.) ). This type of cost award has also been made in circumstances involving unproven allegations of breach of fiduciary duty (see Manning v. Epp , [2006] O.J. No. 4239 at para. 7 (S.C.J.) ). These types of "higher scale" costs are typically awarded to signify court disapproval of a litigant's conduct.
[ 8 ] In this case, there were allegations of improper conduct; that Pomerleau was not who it claimed to be. That was at the heart of the motion and Pomerleau’s business integrity was challenged. This is an appropriate case for substantial indemnity costs. Having said that, I do consider the amount of time spent in preparation for the motion to be excessive. I note over 23 hours to review motion materials; 34 hours for one junior lawyer to do research and review transcripts, and 49 hours for this same lawyer to prepare the motion materials. Having regard to the City’s own Costs Outline, I conclude that that it could have reasonably been expected to pay $20,000.00 (plus HST) for Pomerleau’s response and preparation for the motion and an additional $4,500 (plus HST) for Mr. Doucet’s and Mr. McBride’s preparation for and attendance at the hearing. I further allow the disbursements of $641.34, including HST) as claimed.
Mr. Justice Robert Beaudoin
Date: August 13, 2012
COURT FILE NO.: 05-CV-30446
DATE: 20120813
ONTARIO SUPERIOR COURT OF JUSTICE RE: Hervé Pomerleau Ontario Inc., Plaintiff (Responding Party on Motion AND City of Ottawa, Defendant (Moving Party on Motion) BEFORE: Mr. Justice Robert Beaudoin COUNSEL: Marc C. Doucet, Counsel for the Plaintiff Ronald F. Caza, Counsel for the Defendant COSTS ENDORSEMENT Beaudoin J.
Released: August 13, 2012